Wage Orders in Bankruptcy

Posted on October 22, 2013 at 8:49am by

So you are getting ready to file a Chapter 13 Bankruptcy and your Sader Law Firm attorney indicates to you that your Chapter 13 plan payments will be submitted on your behalf by virtue of a wage order…

What’s a Wage Order?

A wage order is an order entered by the bankruptcy court ordering your employer to submit your Chapter 13 plan payments from your paycheck. The Sader Law Firm strongly encourages all employed persons be on a wage order because a vast majority of Chapter 13 cases that are dismissed, meaning they are not completed and the debtors do not get a discharge, are dismissed for failure to make plan payments. The success rate of receiving a discharge from completion of the Chapter 13 bankruptcy is substantially higher when a debtor makes plan payments by a wage order than by sending the payments directly.

Often, when making direct payments to the Chapter 13 Trustee, a debtor finds other places the money needs to be spent – their gas bill was higher than anticipated, their child needs new clothes, a new iPhone comes out that they simply must have – the list goes on and on. When the payments are taken from a debtor’s wages, they don’t miss the money because they never had it. Additionally, it alleviates the burden of the debtor having to budget around their Chapter 13 plan payment.

How Does a Wage Order Work?

A wage order is issued by the Court and sent to your employer. The employer takes the monthly plan payment amount and divides it between your paychecks. If you are paid twice a month, the monthly plan payment is split in half and half is taken out of each paycheck. If you are paid once a month, the full plan payment comes out of that paycheck. If you are paid every two weeks, most employers take the monthly plan payment times 12 months in the year and divide that total by the 26 pay periods in the year. Similarly, if you are paid every week, most employers take the monthly plan payment times 12 months in the year and divide that total by the 52 weekly pay periods in the year.

It is important that you monitor your paycheck stubs to make sure the plan payments are being submitted by your employer. If your employer does not submit the full plan payment, that does not mean you get a free pass that month on your Chapter 13 plan payments; it is still your responsibility to ensure the payment is made each and every month. If your employer does not take part or all of your plan payment out of your paycheck, you need to contact your attorney so they can direct you on what to do and so they can contact your employer to ensure future payments are made by your employer.

Can I Be Fired for Being on a Wage Order?

Many of my clients are concerned that they will be fired by their employer for having a wage order in place or because they filed a bankruptcy. Under Federal Bankruptcy Law, an employer is prohibited from discriminating against a debtor who files bankruptcy and an employee cannot be fired because they filed bankruptcy. Additionally, most employers look much more favorably upon a debtor who is has filed bankruptcy and is on a wage order than they do upon a debtor who has had a garnishment executed against their wages. The reason for this is that when a person is having their wages garnished, they are still in the midst of the problem, whereas, when a person is on a wage order during a Chapter 13 bankruptcy, they are working toward a solution and doing something about the problem.

Contact an attorney at The Sader Law Firm today to help you work towards a financial solution.

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